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Good morning and happy Friday.
iHeartMedia settled a Federal Communications Commission probe into allegations it pressured musicians to perform at its events, such as Austin’s iHeartCountry Music Festival, for free or reduced rates in exchange for giving their songs more airtime.
Under the terms of the agreement, America’s largest radio station owner didn’t admit to wrongdoing and maintains it never engaged in “showola.” But iHeart now has 60 days to put in place “rigorous reporting and disclosure procedures” that offer the FCC a view into “the relationship between spins on air and performances at live events,” the agency said. In addition to filing compliance reports, iHeart will be expected to open a whistleblower hotline and implement mandatory employee training. Meanwhile, artists will have to continue promoting their work the old-fashioned way: by secretly paying influencers and marketing companies to generate fake engagement on TikTok.
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The only thing more in-demand than SK Hynix memory chips? Demand for SK Hynix Nasdaq-listed stock.
The premier South Korean memory chipmaker, which already trades on the Korea Exchange, makes its US debut today, and investors are so desperate to get another piece of the company that it’s arriving more than seven times oversubscribed, according to a Bloomberg report. Now, one big question remains: Can the company break free from the sector’s historically cyclical nature?
The Cycle of Life
The American Depositary Receipt (ADR) listing comes just as investors are starting to let a little air out of their big bet on the memory sector. Fellow Korean memory chipmaker Samsung, whose shares rose roughly 150% this year before Tuesday, lost about 10% of its value after a blowout earnings report showing operating profit roughly 19 times higher than a year ago. Micron, the other member of the Big Three memory chipmakers, is similarly up 217% year-to-date … and down some 17% from an all-time peak on June 25. Korean-listed shares of SK Hynix have posted almost exactly the same rise and fall, down 25% from an all-time peak on the same day as Micron.
Some of the selloff was likely in anticipation of SK Hynix’s US arrival, but it has nonetheless been big enough to send South Korea’s benchmark KOSPI index into bear territory. That might alarm recent tourists to the memory trade, but longtime residents are quite familiar with the bust following the boom. For SK Hynix, whose founder called its product “industrial rice,” it’s baked into the entire value proposition:
- Despite the prolonged share price rally, SK Hynix is still priced at about 7 times forward earnings. Though that figure could tick up slightly after the Nasdaq listing, it will still be firmly in the territory of a value stock rather than the high-flying growth stock that its revenue and profit explosions would make it seem.
- That modest price-earnings ratio is consistent across the sector, reflecting the risk of a cyclical downturn. Samsung, for instance, trades at a forward price-earnings ratio of about 6, while Micron has edged up this year to about 11; the S&P 500 trades overall at about 20, according to LSEG Datastream.
  Sooner … or Later: But if the world believes a memory sector downturn is a matter of when more than if, even in the AI age, no one can quite agree on how to set the countdown clock. Analysts expect SK Hynix to pull in $150 billion in net income this year. Revenue may triple this year and continue increasing through at least 2030, according to FactSet data, suggesting that a downturn may still be a ways away. The only thing that is certain? The best time to buy that new laptop or Nintendo Switch 2 was yesterday.
Written by Brian Boyle
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Photo via Betterment
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It was just another manic market day, at least for AstraZeneca.
Shares of the British-Swedish biopharmaceutical company tumbled Thursday after it shared the surprising failure of its drug Wainua to meet its target in a recent clinical trial. AstraZeneca and Ionis Pharmaceuticals said the heart disease treatment didn’t outperform the placebo in preventing heart problems in patients with transthyretin-mediated amyloid cardiomyopathy (or ATTR-CM), a rare and potentially fatal disease.
It was a blow analysts weren’t expecting, and AstraZeneca’s shares fell as much as 10.6% in London, its largest intraday plummet since 2017, per Bloomberg. The company’s New York Stock Exchange-listed shares ended Thursday down 5.7%.
High Expectations
AstraZeneca is “meant to be able to have exceptionally good trial design ability,” Jefferies analyst Michael Leuchten wrote in a note following the news. Even so, the market reaction seems outsized for a clinical trial failure and is just the latest evidence that the stock market is dealing in extremes and making headline-based decisions. Results short of perfection can send investors on a selling spree while positive ones spur massive rallies, especially ones related to AI. For instance, as AstraZeneca’s stock was struggling, Micron’s popped after the announcement of billions of dollars in chipmaking investments, and stocks of AI infrastructure companies soared on news that Meta plans to start manufacturing an in-house chip. Speaking of Meta, the hyperscalers are playing a daily game of “they love me, they love me not” with investors.
Of course, one company’s bad news is another’s opportunity:
- The stocks of AstraZeneca rivals Pfizer, BridgeBio Pharma and Alnylam Pharmaceuticals, which sell treatments for ATTR-CM, all initially gained on the news.
- BridgeBio ended the trading day up 15%, and Pfizer ticked up 0.83%. Alnylam reversed earlier gains, ending the day in the red.
Euphoric Markets: When markets are this giddy, the is-it-or-is-it-not-a-bubble question never gets old. Savita Subramanian, head of US equity and quantitative strategy for Bank of America, recently pointed out a red flag to Barron’s: “When there’s massive outperformance of the high-multiple, high-expectation companies like we have seen lately, that tends to be a sign of speculation or FOMO,” she said. “It’s more psychological than fundamentals- or valuation-driven.”
Written by Mallika Mitra
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Photo via Superhuman AI
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Claude can be your analyst, editor and strategist — but most just use it to fix grammar. Sign up for Superhuman AI and get 200+ prompts that turn Claude into your most powerful work assistant, plus a 3-min daily newsletter on new AI tools, tutorials and skills to stay ahead. Claim your free prompts.
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Shares in the membership-based retailer Costco fell 4.1% on Thursday after a June sales update failed to meet Wall Street’s lofty expectations.
That continued a weeks-long slump, but it also means the stock is looking more and more like one of the chain’s hot dog deals.
Conflict-ed Earnings
The S&P 500 Consumer Staples sector tumbled more than 10% at the start of the Iran war, amid fears that consumer spending would suffer because of higher oil prices. Costco initially proved resilient, falling roughly half as much as the sector through the initial rough patch, and then it soared. The company’s business structure seemed tailor-made for the moment: Costco’s cheaper bulk sales at the heart of its membership model appeal in times of consumer stress, and its nearly 600 US gas stations allow it to capture additional earnings when fuel prices rise. By mid-May, shares hit an all-time high.
Then, investors began to sour. The US and Iran signaled they were working toward a peace deal, oil prices started sinking toward pre-conflict levels and Costco’s shares tumbled with them. There were never concerns that Costco was struggling, but some investors cashed out their gains, assuming the record valuation wouldn’t hold. After all, Costco’s high forward price-to-earnings ratio suggests much of its value is already priced in (its 42 forward p/e Thursday is well above the Consumer Staples average of 25). What did concern investors was that Costco’s growth is slowing, a view this week’s numbers appeared to validate:
- Costco’s net sales rose 10.6% in June, the slowest pace since February, after topping 14% in May.
- What remains to be seen is whether the US and Iran end hostilities, which could reignite favorable conditions. Both countries exchanged new attacks this week, but President Trump said he’s unsure if the conflict will resume.
Do We Have a Bargain? Costco shares closed at $912.97 on Thursday, roughly 16.6% below their $1,094.32 May 19 high and the cheapest since early January. Last month, analysts at D.A. Davidson, who set a $1,000 price target on the stock, added Costco to their Best-of-Breed Bison list, which tracks high-quality companies they expect to outperform in the next five years.
Written by Sean Craig
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- Chip on Zuck’s Shoulder: In an effort to double its computing capacity, Meta is set to begin producing its own AI chip, dubbed Iris, starting in September.
- Home Improvement: US home prices hit another all-time high last month even as mortgage rates remained elevated and sales fell 2.4% from May to June.
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